The previous article discussed the basics of employee stock options, focusing mainly from the company’s perspective. However, employee stock options can also have significant tax consequences and impacts to the employees who receive them. Companies and founders need to understand these so that they can explain them to employees and…
No doubt you have heard about stock options before and the stories about how someone became wealthy from the options they held in their startup. If you are wondering how employee stock options work and why they are important for a startup, then this article is for you. In a…
Do you know the differences between revenue, income, profits, and cash flow? Although the terms may be used interchangeably in casual conversation, they do have distinct meanings. Understanding what these terms mean will help you appreciate how each of them affects your business. This article explains the differences between them.…
One of the biggest questions that a startup needs to answer as it embarks on a new venture is how big their market is. Without understanding what the size of the market really is, a company has only a limited understanding of where it is headed. Think of market sizing…
When you’re starting up a company, accounting and finance may be the last things on your mind as you concentrate on engineering and sales. Accounting and finance are often spoken of together and combined operationally, but there are distinct differences between them and fundamental reasons why they should be kept…
In Part I, I discussed the different methods of investment and the order in which this investment is made to explain how this creates the startup’s capital structure. This second article discusses how valuation impacts the investments made and ties the two concepts together. In This Article 1 Understanding Dilution and…
All startups require cash and capital to get going. Startups funded by venture capital will raise their financing in various rounds, and the nature of investment and legal form of ownership in each round varies. The value or valuation of the total company also changes in each round. How all…
A frequently asked question I get from entrepreneurs is how should they set up their company. Legally, there are several different ways of setting up a company, each with their own advantages and disadvantages. Here’s a general overview of how they break down in the United States: Sole Proprietorship Under…
If you are starting up a new company, you are probably hard at work on developing your product or service, sizing up the market, and finding potential customers. Finance and accounting are probably far down your list of priorities, but that doesn’t mean they should be ignored. In this article…